Business Rates Explained for UK Small Business Owners

Business rates are one of the few bills that arrive whether or not you made a profit, which is why they cause so much muttering in small firms. The system is more predictable than it looks, though — and there is usually more relief available than owners realise. Here is how the numbers are built, what you might be entitled to, and what to do when a valuation looks wrong.

Who pays business rates, and who sets them

You generally pay business rates if you occupy non-domestic property. That covers the obvious candidates — shops, cafés, pubs, offices, workshops, warehouses — but also storage units, some holiday lets, advertising hoardings and ATMs built into a wall. The occupier pays, not necessarily the owner, although landlords often pass the cost on through the lease.

Two different bodies are involved, and mixing them up causes a lot of frustration. The Valuation Office Agency (VOA) sets the rateable value of your property. Your local council works out the actual bill, applies any reliefs and collects the money. If you think your valuation is wrong, the council cannot change it — you have to go to the VOA. If you think your bill has been calculated wrongly, that is a council matter.

Home-based businesses usually stay on council tax unless part of the property is used exclusively for business, or you have a separate commercial unit such as a converted outbuilding or workshop. Scotland, Wales and Northern Ireland each run their own versions of the system, with different reliefs and thresholds, so check the rules for your nation rather than assuming England's apply.

How your bill is calculated

Rateable value

Rateable value is an estimate of the annual rent a property could reasonably command on the open market at a fixed valuation date, assuming a certain set of standard lease terms. It is not your rent, and it is not what you could sell the building for. It is a hypothetical figure, based on things like floor area, location, use and condition.

The multiplier

Government sets a pence-in-the-pound multiplier each year, and there are normally two: a standard multiplier and a lower small business multiplier for smaller properties. Because the multiplier sits at roughly 50p in the pound, your annual bill usually lands at about half your rateable value before any relief.

Putting it together

The arithmetic is simple once you have both numbers. If the multiplier were 50p and your rateable value were £10,000, the bill would be £5,000 a year before reliefs. Bills are normally split into ten monthly instalments starting in April, but you can ask the council to spread the cost over twelve instead — useful for cash flow, and councils rarely refuse.

Reliefs and exemptions worth checking

Reliefs are where small businesses save real money, and they are not applied automatically in every case. It is worth reviewing yours at least once a year and after any change in your circumstances.

• Small Business Rate Relief. In England, if your business occupies a single property with a rateable value below £12,000, you may pay nothing at all. Between £12,000 and £15,000 the relief tapers away. Above that, the small business multiplier can still apply to properties under £51,000. There are exceptions if you occupy more than one property.
• Charitable relief. Registered charities usually get 80% off automatically, and councils can top this up to 100% at their discretion. The same can apply to some not-for-profit organisations.
• Empty property relief. Most empty premises are exempt for three months, and industrial premises such as warehouses and factories for six. Very low-value empty properties can be exempt indefinitely. After that, you generally pay in full — so tell the council promptly when you move out.
• Rural rate relief. Available for certain essential services in designated rural areas, such as the last village shop or pub.
• Discretionary relief. Councils can reduce bills for businesses facing hardship or providing community benefit. It is discretionary, so you have to ask.

How to challenge a valuation that looks wrong

You cannot appeal simply because your rates went up. You need a reason: a factual error, or evidence that the valuation itself is too high. The process in England runs through the VOA's online service, and the deadlines are strict.

1. Check the property details first. Look at what the VOA holds — floor area, description of the property, address. Mistakes here are common and are the easiest thing to fix.
2. Gather evidence. Floor plans, your lease, photographs, details of any part of the building you cannot use, and rental evidence from comparable premises nearby.
3. Submit a challenge through the VOA's service, setting out clearly what is wrong and why. Keep a copy of everything you send.
4. Keep paying your bill. Challenging a valuation does not suspend liability, and falling into arrears while you wait creates a new problem. If you win, the council issues a revised bill and refunds or credits the difference.
5. Appeal to the Valuation Tribunal if the VOA decision does not resolve matters. This is free to do, though there is paperwork involved.

Be wary of cold calls from firms offering to handle an appeal for a fee. You can submit a challenge yourself at no cost, and a third party cannot negotiate a better outcome than the evidence allows. For complicated premises — large industrial sites, unusual buildings, or multiple properties — it is worth taking professional advice before you act.

Keeping the bill under control

The practical routine is short. Check the VOA record for your property once a year and after any alteration. Confirm with the council that every relief you qualify for is actually being applied, especially after you expand, take on a second site or go quiet for a few months. Ask about twelve instalments if ten pinch. And diarise revaluation years, because that is when the biggest swings in your bill tend to happen.

If your circumstances are unusual — a mixed-use building, a property that has been empty for a while, or a valuation you believe is clearly out of step with the market — speak to a surveyor or rating specialist before the deadline passes. A little admin now is far cheaper than an overpayment running quietly for years.

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